The detailed plan for the housing sector, published by the Department last week, represents a significant step forward.
It brings together the wide range of policies needed to expand housebuilding, and to ensure that those who are currently seriously impacted by the housing shortage can look forward to better times in the future.
The plan is strong on funding the building and purchase of new houses, and on an increased role for the State in driving development, but it is somewhat weaker on ways to reduce the costs of housing.
The proposed introduction of legal measures to ensure the State benefits from the increase in land prices when it is rezoned from agricultural to urban use is important. Development land is worth a multiple of agricultural land. Over the last 50 years, getting your land rezoned was the easiest way to get rich quickly. This temptation gave rise to the planning scandals investigated by the Mahon Tribunal.
The Government has promised that the State will in future share in the benefits of enhanced land values on the lines of the 1973 Kenny Report, helping to fund housing investment.
Another important change is the decision to end the leasing by the State of new developments for social housing. This was more expensive than the State contracting to build new homes for letting or buying them outright.
The return investment funds can earn on long social housing leases far exceeds the cost of borrowing to the State, and the State has no asset at the end of the lease, so it’s been a very poor deal. While leasing can deliver mixed tenure and a social mix, there are cheaper ways to achieve this objective.
The plan commits €4 billion a year to the broad social housing programme. By including it in the long-term capital programme, it should avoid some of the stop-start problems of the past, which proved wasteful and demoralising for all those involved. Planning ahead will produce better value for all.
Planning system
However, I remain concerned that the necessary public investment in housing is to be funded via higher levels of borrowing over the next few years, without offsetting revenues from taxes or rents, according to the Summer Economic Statement. This is unwise, as interest rates will not remain low indefinitely, and the costs of servicing this borrowing will rise, at a time when there are other major pressures on public spending.
Over the coming decade, there will be significant growth in the monies needed to serve our rapidly-ageing population, pay their pensions and fund their support needs; to improve the capacity and quality of our health service; and tackle climate change.
Our current planning and appeal system is dysfunctional. It delays development, adds to uncertainty, ultimately pushing up costs of construction. The plan announces reforms of the planning system, though details are still to be worked out. We need a planning system that is efficient, speedy and certain. Fewer delays will ease costs.
It is disappointing that no corresponding review of building regulations is included to assess if all remain fit for purpose, and don’t increase costs for no real public benefit.
Increasing the share of private developments required to be made available for social or affordable housing may look worthwhile at first glance. It reduces the costs of provision for the State, and it can improve the social mix. In the long run, developers may bid less for land as a result.
However, in the short term, when the land price has already been paid, other homes in the development must sell for more to cover the cost of the social provision – effectively a tax on other new homebuyers.
While increasing social housing is a desirable goal, its cost should be spread across society as a whole, with existing owners carrying a share, for example via property tax rates.
While the plan recognises that dramatically increasing housebuilding will require almost 30,000 more skilled workers, it hasn’t factored in the additional competing demand for such labour that will come from the Government’s separate plan to tackle climate change.
To decarbonise, we need to retrofit almost 500,000 houses by 2030, and an extra 20,000 skilled building workers will be required to do so. So overall, we need to increase our building workforce by over 50 per cent over a very short period of time. Otherwise we risk missing both our housing and our climate targets.
Ultimately, Housing for All will succeed or fail on its capacity to deliver the increased supply of housing needed to correct our dysfunctional housing market.
